The hallmark of a good supply chain is to plan on disruptions and build in redundancies in the network. The current spike in demand could lead grocery stores to increase capacity that may not be needed when the pandemic ends. Without careful management and communication, it’s a potential example of the bullwhip effect.

In addition, the health of farm workers upstream in the supply chain is a major concern, the longer the pandemic lasts.

They focused on consumers’ simple needs and disrupted the old adage “You get what you pay for.” They fearlessly lured customers away from giant corporations’ established brands and succeeded. Their strategy was to offer quality, basic products at much lower prices than the competition’s and connect directly with their customers. However, for all start-ups, easy market entry with a catchy video on a Web site is both an opportunity and a threat: it helps achieve rapid success while leaving the door wide open to other daring, new competitors.

Costco is planning to vertically integrate by owning production of 40% of its rotisserie chicken supply chain.

Vertical integration is an effort to keep the price at $4.99 to attract customers. The issue is that the main chicken suppliers are producing fewer whole birds, down from 50% of the supply in the 1980s to just around 15% of the supply today.

Bird size has also increased as the demand for chicken has increased. Most whole chickens today are too big to fit on the Costco rotisserie production equipment. Costco needs 6 pound birds and the typical whole chicken is now 7-8 pounds from suppliers.

Costco can control the size of the bird and plans to cut costs per bird by 35 cents by developing their own poultry complex.